McAnally and ASCAP are now embroiled in a fight over the matter: an ASCAP review board ruled in the PRO's favor and now the case is headed for review by an independent arbitration panel, a process that McAnally's camp believes is not impartial, but one by which ASCAP members agree to abide upon joining. (Members can't hire CPAs to audit ASCAP or file suit against the group, say sources in McAnally's camp.)
Their dispute spotlights the perks that all U.S. PROS now need more than ever to snag and retain talent that can boost their leverage in licensing deals.The U.S. is the only country with four performing rights organizations: ASCAP, BMI, SESAC and their newest competitor, Global Music Rights, launched by artist manager Irving Azoff in 2013 and run by former ASCAP executive Randy Grimmett.
Some publishing-world executives are concerned that such bonus payments to the stars reduce the share of the pie received by songwriters who don't have as much chart action. But others argue that without rewarding the big hit songwriters, PROs wouldn't be able to command the the same licensing rates, leaving the rest of the songwriters with a smaller pot at the end of the day. ASCAP was able to claim a bigger market share by including McAnally's works in its radio license, for example, though following his resignation didn't pay him on an equal basis to his ASCAP co-writers for licensing the same works to the same sources, his camp says.
The McAnally dispute also offers a glimpse into how the bonuses for hit songwriters can run into the millions of dollars.
Between the time he resigned and finally received a statement, McAnally alleged that the organization changed the rules and the funding mechanism for premium payments by taking out un-surveyed radio money and only using un-surveyed general licensing funds. This alleged change allowed the PRO to justify withhold premium payments from McAnally, according to his argument.
But a Dec. 22, 2017 ruling by ASCAP's member-elected board of writers and composers -- John Bettis, Arthur Hamilton, Charles Bernstein, Melinda Wagner, with James DiPasquale serving an alternate; and publishers Helene Blue Musique's Blue, Major Bob Music's Bob Doyle, Hal Leonard's Keith Mardak; Downtown Music's Justin Kalifowitz and Subito Music's Stephen Culbertson -- found "that ASCAP's phase-out of AFP payments to Mr. McAnally is in accordance with the rules and regulations adopted by the Board of Directors governing distribution of royalties. There is no evidence that ASCAP orchestrated a "windfall" for its own gain…Nor is there evidence of any inappropriate scheme" for withholding payments due to McAnally," the ruling, posted on ASCAP's website, stated.
"The evidence shows that, had Mr. McAnally resigned and left his works in the ASCAP repertory, he would have received AFP payments in full: ‘Under Section 3.3.1, a resigning member who leaves his or her works in the ASCAP repertory (but not a member who elects to remove the works) will continue to receive distributions calculated on the same basis as current members,'" the board's decision stated. "Mr. McAnally, however, elected to remove his works from the ASCAP repertory, so his resigning member distributions were appropriately calculated under Section 3.3.2 of the S&D Rules," a process that ASCAP says had to be done by hand, which meant McAnally's quarterly reports following his resignation were several months delayed.
Lawyer Jason Turner of Keller Turner Ruth Andrews & Ghanem PLLC, who represented McAnally in the dispute, is appealing the decision.
"Hit songwriters who want to resign can't leave ASCAP and take their songs with them unless they are willing to leave hundreds of thousands of dollars on the table. It's like being in Hotel California - you can affiliate with ASCAP but you can never afford to leave," he says.
Industry observers note that the whole idea of premium payments is to pay songwriters bonuses for staying with ASCAP, not to reward them when they want to leave. Other songwriters and their representatives who've researched the process have managed to collect the premium payments for their old PRO while also collecting a signing bonus at their new PRO, these observers add.
"ASCAP has rules that apply to everybody, which are transparent and fair," songwriter and ASCAP chairman and president Paul Williams told Billboard. "They are the same for me as they are for a new writer. The bonus payments diminish in a way that's fair. I am not sure [McAnally's camp] read our rules correctly."
Neither McAnally nor his representatives ever "inquired about what effect his resignation would have on his distribution," according to the board's ruling. While Turner argued the funding mechanism for premium payments isn't transparent, ASCAP says that just because it is not published -- due to competitive reasons -- doesn't mean the information is unavailable to members, if they ask, the board's ruling stated.
The history of premium payments for hit songs, to entice songwriters to stay with their performance rights organization dates back to 1994 ASCAP, when it began its Radio Feature Premium. (BMI has a similar program, too.) The ASCAP Board of Directors in 2002 devised a phase-out of premium payments for songwriters leaving the PRO, since payments come months after the performance and because most general licensees have one-year licenses that end at staggered times throughout the year. Thus, the board came up with a formula that gives departing songwriter's songs 100 percent of royalties and premium payments due in the first quarter after the effective resignation date, reduced to 75 percent in the second quarter, 50 percent in the third and 25 percent in the last quarter, ending all payments.
Soon after McAnally resigned, ASCAP's Radio Feature Program (RFP) was expanded to include satellite radio and streaming and renamed the Audio Feature Premium (AFP) program, beginning in June, 2015 for publishers and July of 2015 for songwriters. In between his effective Jan. 1, 2015 resignation date and when they started payments for the AFP program in June of that year, McAnally alleges that’s when ASCAP changed the funding mechanism so they could stop paying him the bonus on radio play. “It was a slick sleight of hand that is actually the exact opposite of the ‘transparency’ that ASCAP talks about,” McAnally said in a statement.
ASCAP says it didn’t change anything, and its board of review agreed, which is why McAnally is now seeking outside independent arbitration.
Azoff, GMR's founder, says that as a longtime advocate of artists, he's still "outraged" that ASCAP pays acts differently when they are leaving. GMR offers acts financial incentives to join like the other PROs, but it also gives its clients the right to audit and has a rate card, so the songwriters can see what they will get for each performance. While ASCAP and BMI pay out 88 percent of revenue and keep 12 percent to cover overhead, SESAC and GMR operate as for-profit companies. GMR pays clients their royalties first according to the rate card, and then if there's anything left over they get to cover their expenses and capture a profit. (So far, that hasn't happened for the new company, according to sources.)
"Artists are the essence and lifeblood of the entertainment industry and ASCAP's [approach to member retention] is a direct attack upon their creativity. GMR was founded to prevent this kind of treatment," Azoff told Billboard.
ASCAP's Williams counters that "ASCAP is of, by and for creators. As creators, our member-elected Board cares deeply for all of our songwriters and we act for the greatest good of all concerned, whether hugely successful or just starting out. For 104 years, the most celebrated of America's songwriters have counted on that fairness. Shane was paid all of the money he was owed after he left ASCAP and went to GMR. I hate to see any songwriter disappointed, but in this case, Shane has been treated and compensated fairly. I wish him nothing but the best, but it would be unethical and unfair to all ASCAP members to disregard our good faith rules for the benefit of one, when they were meant to protect all."
Writers have asked to go before the review board 41 times in over 50 years, and the board has ruled in favor of ASCAP 38 of those times, with one split decision. Most disputes are settled before they reach the board.
Of those who lost, seven songwriters asked to go to outside independent arbitration, and two of the ASCAP board rulings were reversed as a result, according to ASCAP. In one of those reversals, the independent panel voted in favor of ASCAP saying it followed its rules but they were unfair and the PRO board subsequently changed those rules, according to ASCAP.
While Turner points out that the board has overwhelmingly ruled in ASCAP's favor, Williams says "the fact that so few members have gone before the board of review is indicative of how fair and honest ASCAP is in its application of its rules."